FORTUNE -- One China defender recently claimed his countryman's "bandit innovators" could be good for the world. That was small consolation for the Japanese, who say that China pirated their world-famous bullet train technology.

"Don't worry too much about Chinese companies imitating you, they are creating value for you down the road," said Li Daokui, a leading Chinese economist at the Institute for New Economic Thinking's conference. Such "bandit innovators," he expanded, would eventually grow the market, leading to benefits for everybody.

Risk analyst Michal Meidan of Eurasia Group believes KHI is wise to drop the IP suit and stay out of China. "Every firm working in the high-tech space in China should be aware of the risks related to weak IP protection in the country but often has few choices but to go into these agreements if it wants to gain market share there," she says. "The intense competition prompts companies to make concessions on technology transfers, as the Chinese are very good at playing off the competition."

What could drive the normally unlitigious Japanese into such a frenzy? Not only did China copy their technology, say the Japanese, after patenting remarkably similar high-speed-rail (HSR) tech, CSR now wants to sell it to the rest of the world -- as Chinese made. Both Japanese and European rail firms now find themselves frozen out and competing with their former Chinese collaborators for new contracts, inside and outside China.

With a diminishing domestic market, Japan's train industry is hoping to pick up orders abroad for its HSR. Before China stepped in, undercutting Japanese offers by about half, Japan looked very attractive to foreign buyers with its record for fast, reliable train systems.

With more than 300 million annual riders, Japan's Shinkansen -- 50 years old next year -- trains carry more passengers than those of any other HSR system. It has suffered no fatal accidents. The U.K. was impressed enough to complete a 540 billion yen deal with Hitachi, which also builds Shinkansen, to supply bullet trains by 2016.

The Motherland of train travel is not alone. Everyone is shopping around for high-speed solutions including the U.S., as the $180 billion global rail industry continues to boom.

Outside of Britain, Japan could easily find itself edged out by the Chinese competition. This makes KHI's Harada Takuma, who worked on the Chinese collaboration, very angry. Under the licensing agreements with KHI, China's use of the expertise and blueprints to develop high-speed railway cars was to be limited to domestic application, he explains. "We didn't think it was not risky. But we took on the project because terms and conditions under the tech transfer should have been binding. We had a legal agreement; we felt safe."

The Chinese authorities, for their part, see no problem. As Beijing busies itself filing for HSR patents abroad, it claims China developed her own HSR based on Japanese and German technologies which it claims were merely "digested." When it was suggested that China trains were mere knockoffs at a press conference in China recently, the Ministry of Railways spokesman asserted that China's HSR was far superior to Japan's Shinkansen, and that the two "cannot be mentioned in the same breath."

Others, such as a few Chinese engineers, have admitted no real innovation. That they were "just standing on the shoulders of giants" as one rail technician put it. Wherever the truth lies exactly, KHI's train technology transfer saga is unlikely to be over soon.

The Japanese experience should be a lesson for the world. Our greediness, desire to pile up profits in China, is at the source of the problem, not the Chinese.

日本的教训值得全世界借鉴。问题的根源在于我们的贪婪，渴望在中国大赚一笔，不能怪中国人。

oneworld2

The Japanese use to copy them selfs before they started innovating.

日本人开始创新前也是拼命抄。

disqus_AKB6qo3ejz

How funny! Thirty years ago, American manufacturing use to complain about Japan stealing their intellectual property. Japan would then make the product cheaper and better. Now China is doing it to them!

真有趣！30年前，美国生产商常常抱怨日本偷窃知识产权，日本然后生产出更便宜更优质的产品，现在轮到中国这样对付他们了！

Shuami disqus_AKB6qo3ejz

It took the Japanese about 20-30 years to leapgrog, for the most part,their American auto-industry counter parts, based on copiedtechnologies. Maybe after 20 years, it will be the Chinese's turn to dothe complaining. Of course, we all know where a lot of American technologies came from, after the WW2. The cycle goes on. To copy is human nature--that's how kids learn.

People are surprised by this? The cheap labor comes at a cost. Literally EVERYTHING that we are outsourcing is being copied,

这有什么好惊讶的？廉价劳动力的获得是有代价的。实际上，我们外包的每一样东西都在被抄。

Dan Mark Hungerman

India is certainly doing similar things for some industries...

印度的某些行业肯定也在如法炮制.....

Guest

Some 20 years ago, my father -- then a State Department liaison -- returned from China with a massive, albeit inferior, bootlegged copy of the World Book Encyclopedia dictionary at a fraction of what an authentic copy would've cost. For decades, China had a well-earned reputation for its tacit approval of widespread theft of intellectual property and copyright infringement -- from bootlegged books, DVDs and Gucci handbags to consumer electronics knockoffs (including the latest iPad mini tablet dubbed iPed in China). Why should it surprise us now that it has extended this brazen policy to high-speed rail trains in order to gain a competitve edge on the West?

This is a well known case of intellectual theft by China. Kawasaki Heavy Industries (KHI) would win their case in California court if they try to build this KHI tech into the US. KHI would be foolish not to pursue their case in US court This is an open and shut case. No doubt about it for anyone who follows these types of legal questions. I encourage Kawasaki Heavy Industries to move on this case in US court.

The mere fact that this question is being asked is pure humor. Communism does not promote creativity. Free thinkers are thrown into jail for causing "unrest." So again ask yourself, did China steal this? Dumb question. I think the better question should be, " Are you willing to sacrifice industry trade secrets and R&D for a few years of higher than normal returns on investments?" My thoughts are that corporations are starting to wise up to this scam and now China has resorted to internet espionage because there are far fewer companies willing to locate there due to the high rate of theft. The unwillingness of the Chinese government to correct intellectual theft has come back to bite them.

Uh huh. Must be why almost all of the Fortune 500's have set up R&D shops in China. Intel just announced another one in JV with Baidu to do mobile applications.

The reality is that with 6 million college grades newly minted each year, with more than half of those in science and engineering, doing R&D in China costs 1/5th that in the West (or in Japan for that matter). The trend is clear.

额，也许这就是为何几乎所有财富500强的公司业已在中国设立研发部门的原因。英特尔刚宣布和百度组建一个从事移动运用的合资企业，

实际上，中国每年有600万大学生毕业，其中超过一半是理工科生，在中国从事研发的成本仅是西方（或者日本）的五分之一。趋势是明显的。

grattaevinci Zhuubaajie

Sorry I am in high tech....but what you say is not true...my ex company (world famous in communication chips) by their own admission will never open an R&D in china. Only sales and some software.

I can tell you more....when in china, we were forbidden to share any technical presentation apart from few stupid pics with our chinese "colleagues".

This is very very common in the whole semiconductor industry. Moreover chinese employees are scrutinized 10 fold respect to westerners, their computers are always monitored and so on so on.

this at least in my field and honestly I agree with it. My ex company got burned by 3 chinese employees that took a complete chip database and reproduced entirely in china without even erasing the company logo from it.

The chinese gov covered them up making any legal suit completely useless.

I have a chinese wife who is herself ashamed (being a lawyer) of the so widespread intellectual theft going on in china.

I am sure there are very honest chinese like my wife and her family but from what I saw there they are a minority (just my experience).

I think china would require a couple extra generations to align to the common practice in intellectual property right but till then any company that opens an R&D there or "shares" their tech in china is playing a very dangerous game.

China is a huge country, just like the US, only several times bigger. There are honest people and there are crooks, just like in the US too. That it's in its early development cycle definitely encouraged some of the unscrupulous practices, as we have witnessed that phenomena for pretty much all the developing countries. Just remember that the US itself and later Japan have both gone through this stage themselves.

So what, the Japanese been stealing techs from us for decades.Most of the stuff they claim they invented are actually from our patent office!

那又怎样，几十年来，日本人一直从我们这里偷技术。大多数他们所宣称发明的东西其实来自我们的专利局！

f ray

the question should be what hasn't China stolen since forever?

应该这样问：有什么是中国没有偷的？

Richard Jefferson f ray

Really? How about you look up what China invented and brought to the world.

真的？要不你去查下中国发明了什么，给世界带来了什么。

john doe

japan used to be like china in that it would steal american technology, then with their government funds theyd price their copiers, tools, cars, tv's below what we could make them for until appetite for paying higher prices stopped and desire for lower priced goods took hold. then japan would increase the prices in these areas where they had driven every american company out of business. We are allowing foreign companies to destroy our industries, then we become a nation of marketers and not manufacturers. Subsequently, we allow Americans to take our technology to china where they have access to slave labor and set up shop. Their new partners in china then require them to share all new patents - effectively destroying each company relocated there as now their new host parasite will take that technology given to them by all these many companies and make their own products and eventually kick the companies out or use that technology in their own companies.

Umm, no. The United States, after WWII, willingly went into Japan to help it rebuild in commercial industry rather that military. We, the good ole USofA showed them how to do it "right". We directed them on how to innovate. The Japanese are very good students. They took what we offered, refined, expanded it, and are the global market player today because we showed them how.

Let me tell you something, this country became highly industrialized just because Americans were good in copying British and German technologies in 19 century. USSR successfully copied many American technologies including A-bomb and became highly industrialized country at some point... Now China does the same that everyone else already did before.

BTW, Japanese were VERY GOOD in copying of someone else's technology a hundred years ago...

If your going to dig that far back into history, you should really refresh yourself on American ingenuity and advancements, 1800's come on! We owned that era. Yah...WWII, we took a lot of stuff but so did the rest of the world. To the victor goes the spoils.

Yup, no question. America took the entire chemical weapons research team, with the research data on live-body tests that the JP military ran on civilian in China, and exempted the group from war crimes trials after WW II. To the victor goes the spoils.

many large corporations in Europe and US are already backing out major investments in china - hope Apple, HP, Cisco etc. will learn the same before too late. China market is most phony and uncertain or guaranteed. if corporations that depend on china market to profit or grow, they will have no chance to compete or survive anywhere else.

First of all, Kawasaki authorized the transfer of the technology. Japan did similar things in the past - Hitachi stole IBM's secrets, and Japan licensed the transistor from Bell labs, only to put American companies out of business.